When Reed Howlett took the helm of pet food company Nature’s Variety five years ago, one of his first decisions was to move the company to St. Louis from Lincoln, Neb.

Howlett, who owns a Cavalier King Charles Spaniel named Henry, said it came down to St. Louis’ deep bench of “pet talent.”

“I felt this was the best place,” said Howlett, whose company sells grain-free and raw products, and is on track to reach $100 million in top line revenue next year. “You’ve got Nestle Purina, you’ve got Royal Canin, the FURminator, AFB (International), as well as a lot of consumer packaged goods talent in this town.”

St. Louis has long had a seat at the pet food table, starting with William Danforth’s founding of Ralston Purina in the 19th century. Today, the area’s pet food companies generate more than $9 billion in revenue, and two of the industry’s biggest players, Mars Inc., which owns Royal Canin USA, and Nestle Purina, have a strong presence here, along with companies like AFB International, a more than $100 million flavor company, and Nature’s Variety.

That concentration of pet talent, and the industry’s rapid growth, mean the pet business is also growing in St. Louis, where existing and new companies are on the forefront of designing new products to meet the increasing demand for healthier pet food.

“It is an important city for the industry,” said Kurt Gallagher, director of communications and export development for the Pet Food Institute in Washington, D.C. And Kimberly Whitler, a former head of strategic marketing for PetSmart who’s now a business professor at the University of Indiana, compared the impact of the pet industry in St. Louis to that of Anheuser-Busch.

“All the different companies, whether they’re little ad agencies or marketing firms, existed and survived because A-B needed them,” she said. “Tangentially related services that are trying to work with Purina are going to grow up there.”

Indeed, Doug Martin, who is CEO of a $5 million company called Treat Planet, said he recognized growth potential locally when launching his business in 2010. He compared St. Louis’ pet industry with a “big incubator of knowledge,” thanks to Purina and others. “We’re the next layer below that — fast-growing specialty products,” he said.

FULL BOWL

Overall, the pet food industry is a $20.7 billion industry. Despite the recession, the market grew 18 percent in the past five years, according to market research group Packaged Facts. Four companies — Mars Inc., Nestle SA, Proctor & Gamble and Del Monte Foods Co. — account for 66 percent of the industry’s revenue.

But that could change.

“Increasing pet ownership and the emergence of ‘pet parents’ has created lucrative opportunities in the pet food marketplace,” wrote analyst Josh McBee in an IBIS World report this year.

Gordon Wade, director of the Purina brand, said the industry is more competitive, and the market is characterized by pet owners who care deeply about “doing right” by their pets. Demand for Purina Pro Plan, which is designed for champion dogs, has led to double-digit growth, he said. “More regular people are interested in the brand because of the pursuit of ‘the best,’” he said.

HEALTHY DISH

Indeed, the natural food segment of the pet food industry accounts for $2.5 billion, and it’s growing three times faster than the rest of the industry. “A lot of consumers believe what’s good for them is good for their pet,” said Michelle Maskaly, editor in chief of Pet Age Magazine.

At Nature’s Variety, Howlett said business has grown 30 percent a year for the past three years, thanks to new products and distribution channels, including Petco, which began carrying Nature’s Variety two years ago. “Consumers walk into pet stores and see raw food for pets and say, “Terrific, I can now feed my pet what I feed myself,’” said Howlett.

Nature’s Variety sells Prairie and Instinct brands, the latter of which is grain free and accounts for 80 percent of the company’s business. About a third of the business is raw pet food, which is not cooked and designed to mimic what animals eat in the wild. “Our belief is, when you feed them what nature intended most directly, they’re going to thrive the most,” Howlett said.

Ian and Teresa Miller, co-owners of pet supply store Treats Unleashed, also wanted to get in on the natural pet food trend 10 years ago. They asked Teresa’s dad, Frank Ivey, a former scientist at Novus International, to create an all-natural pet treat and that recipe helped them launch their first store in Chesterfield 10 years ago.

Today, Treats Unleashed has eight locations, each of which generates $300,000 to $750,000 in sales a year. “Nutrition is our key focus,” said Teresa Miller. “We take pride in the fact that it’s science based, not brand based.”

Treats Unleashed’s newest location, which cost $225,000 to open, is at Taubman Prestige Outlets, about four miles from the original location, which is still open.

INGREDIENTS MATTER

The emphasis on natural products has trickled down to local ingredient suppliers, including Bunge North America, part of Bunge Ltd., the $61 billion grain processor, and Novus International, a $1.2 billion animal feed company. Novus focuses on nutrition for poultry, pork and beef, but it also entered the pet market seven years ago.

“There was a certain overlap in the R&D work,” said Heather Thomas, global marketing manager for Novus’ Stratum Nutrition division, which provides amino acids, chelated trace minerals and pre-biotics to pet food companies. “Some of the customers on the feed side said, ‘Hey, do you do pet nutrition as well? What do you have?’”

St. Charles-based AFB International, which develops flavors for pet food, has seen sales triple in the last decade as the pet food market has grown, said CEO Jackie Levin. Sales are between $100 million and $150 million annually, she said.

“Forty years ago, pets were pets. You fed them table scraps,” she said. Now, “Because we love our pets as our children, we treat them differently in the foods that they eat, the toys they play with, the treats they get. You start to see the quality of those items go up.”

Levin said AFB is fielding more requests for a variety of protein sources in its flavors, including seafood, pork and lamb. “We actually have vegetable flavors, which is always interesting to me because cats are carnivores,” she said. “We have flavors that are hypoallergenic, so if a dog has an allergy, the flavor that we provide won’t cause an allergic reaction.”

Today, about 70 percent of AFB’s business is in North America, followed by Europe and Asia. There are also opportunities in emerging markets, including Latin America, where the market is growing 5 percent to 9 percent a year, compared with 2 percent to 3 percent in mature markets. AFB, which employs 250, has opened sales offices in Mexico and China this year, and recently opened a $10 million facility in the Netherlands.

CONVENTIONAL STILL APPEALS

But not everyone agrees that grain-free, raw or organic pet food is best.

Purina has intentionally stayed away from raw food and grain-free pet food. “People are humanizing their pets, and that’s OK to a point, except they really are different than us and they do have different needs than us,” Wade said.

Wade said it is the company’s “strong point of view” that grains bring nutritional value to pets; similarly, Purina hasn’t (yet) deemed raw food safe or advantageous enough.

The strategy has benefited the company. Last year, Nestlé Purina’s U.S. sales were $7.8 billion; as of December 2012, the company had posted nine straight years of sales growth. Purina has 2,000 employees at its Checkerboard Square headquarters.

Analyst Jon Cox of Kepler Cheuvreuz, based in Zurich, said Purina is “one of the brighter lights in the overall Nestlé portfolio.” Purina’s been innovative with new products such as Dog Chow Light & Healthy, which addresses consumers’ desire to feed their pets healthful food.

Similarly, Royal Canin USA has eschewed a lineup of trend-driven ingredients in favor of formulas tested by the company’s R&D division.

Royal Canin was founded in 1968 by a French veterinarian seeking to address animals’ skin ailments through their diet. Today, it is a $1 billion business owned by Mars Inc., the $33 billion candy empire in Mclean, Va. (Royal Canin’s headquarters are in Aimargues, France; Royal Canin USA is based in St. Louis.)

Keith Levy, CEO of Royal Canin USA and a former top marketing executive at Anheuser-Busch, said Royal Canin is different than other pet food in that its varieties are specifically formulated for a pet’s breed, size and age. That specificity has driven double-digit growth over the past few years, as have the company’s distribution points, which include veterinarians, pet specialty shops and breeders, which all convey powerful recommendations. Tellingly, its business with vets is the largest, Levy said. “It’s a powerful recommendation when a veterinarian says, ‘Your pet has an issue that could be fixed with a specific diet,’” he said.

For $10 a bag, Fido can enjoy freeze-dried duck liver

Wouldn’t your dog love to gnaw on freeze-dried bison or duck?

Doug Martin, owner of Treat Planet, thinks the answer is yes, and he has a $5 million company to prove it.

“A lot of people are looking at their pets as kids,” Martin said. “That’s driving the growth of people looking for products like mine.”

Martin started Treat Planet with partner Sherry Huber after a successful career in cancer diagnostics. With Jim Unnerstall, Martin previously built a $15 million diagnostics company, Coretech Holdings Inc., before selling it in 2008 to Leica Microsystems.

In 2010, Martin and Huber began buying up dog treat companies. “I really like the dynamics of the industry,” Martin said. “The humanization of pets is a trend that’s gaining momentum every year. I saw a lot of opportunity there.”

Based in Maryland Heights, Treat Planet’s portfolio now includes Snicky Snacks, which makes organic treats; Hare of the Dog, which is 100 percent rabbit; and Etta Says, which makes the freeze-dried duck and beef, lamb and chicken liver chews.

Treat Planet employs 25, up from three in 2010, and it has expanded its office three times, most recently to 15,000 square feet on Prichard Farm Road in Maryland Heights.

Treat Planet’s brands are sold in specialty stores, and range in price from $5 to $12 per bag. On the higher end of the spectrum, duck liver treats fetch $10 per 5.5-ounce bag, and an 8 oz. bag of duck jerky costs $9.50.

Treat Planet continues to look for other acquisitions “that make sense,” he said. “Once you have a platform built, nationwide distribution, you get some pretty fast growth because you have the channel, market and customer.”

Ironically, Martin is back in the same office space that he occupied at Coretech. (He called his old landlord to inquire about the space when Treat Planet outgrew its last office.)